This story is provided and presented by our sponsor Navy Federal Credit Union, a U.S. credit union headquartered in Vienna, VA, serving the U.S. Armed Forces and their families, chartered and regulated under the authority of the National Credit Union Administration.
For more information, visit navyfederal.org.
Financial Firsts: Giving yourself a financial makeover
If you’re ready to turn over a new leaf, financially speaking, now is the perfect time to make your savings resolutions. Even if you’re on top of your budget, there’s always room for improvement. It all starts with setting some personal goals and then using the right tools to meet them. Fortunately, you have a variety of savings tools at your fingertips nowadays to help you get started quickly and easily.
Start with the basics
One tried-and-true way to save money is by using direct deposit. It’s the fastest, most convenient way to send a portion of your pay directly into a savings account. This approach lets you “forget” you have that money and prevents you from spending what would otherwise be in your checking account. Even if your budget is tight, start small so you can leave room to grow. The point is to start saving now!
It doesn’t take a General to figure out saving money is important, but where should you be putting your money? The first place is to put extra cash is into an emergency fund at a financial institution you trust. This can be in the form of a savings account that you’ve set up—hopefully with direct deposit. We all hope for the best, but you should still plan for the worst. Unfortunately, many of life’s setbacks can’t be predicted and not having funds set aside can leave you with high credit card debt—or in worse cases financial straits. Building an emergency fund will cushion you from unexpected costs, like if your car breaks down or if you need a new microwave. A good rule of thumb is to save at least three months’ salary—that should be enough to cover most unplanned expenses. Remember to stay flexible by growing your emergency fund as you earn more money, and replenish it if you ever make withdrawals.
Expand your horizons
Savings accounts are great for budgeting and conserving your money. They’re accessible, too, because your money is ‘liquid,’ meaning easy to get to. If you’re concerned your savings account is too liquid, and you’re tempted to dip into your savings, a share certificate might be the way to go. Certificates allow you put money away for a determined amount of time at a fixed rate of return. Once you put the money in, you can keep depositing money up to certain amount, but you can’t make withdrawals before the maturity date—or the end of the certificate’s term. If you do, you’ll have to pay a cash penalty from the amount you’ve got in the account. This is a way of making sure you keep the money in the account until it’s matured. That’s the best and surest way to build up your savings. Certificates usually offer higher rates than regular savings accounts and come in a variety of terms—from a few months to several years.
Certificates are also a perfect tool for saving throughout the year for bigger items, such as a car or holiday gifts. Simply choose a certificate with a term that fits your savings goals and stick to your savings plan. Rather than taking out a loan or putting things on a credit card, by using a certificate, you’ll actually save money because you won’t be paying interest—you’ll earn it instead!
Develop good habits
A great place to start budgeting is with your leave and earning statement, or LES. Most LESs are online, but you can easily print them to use for budgeting. An LES includes your salary, taxes and allowances for food and housing. Treat this like the blueprint for your budget. Next, figure out where you want to go financially. Are you planning on retiring from the military? Do you want to transition to the private sector? Ask yourself where your career is going and how you’ll pay for financial milestones like buying a car or house, getting married or starting a family. Once you have an idea of when you want to afford these things, find a savings product that fits your needs.
Another great habit is to eliminate debt. Start by paying off your credit card balances immediately. You can also practice “vice matching” by saving a little every time you treat yourself. For example, if you spend $5 on a latte twice a week, you can vice match by depositing $10 into your savings account at the end of the week. It may seem small, but it’s a perfect way to develop good habits and stick to your budget while still enjoying yourself.
A financial makeover will take some time to kick in, so take small steps as to not disrupt your lifestyle. With a little patience you’ll see the new (financial) you soon enough!
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This story is provided and presented by our sponsor Navy Federal Credit Union. For more information, visit navyfederal.org.
©2015 Navy Federal Credit Union. All Images used for representational purposes only; does not imply government endorsement.